Leadership In Law Podcast

S03E115 'Fixing Healthcare' to Reduce Waste & Improve Benefits with Donovan Pyle

• Marilyn Jenkins • Season 3 • Episode 115

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Healthcare is swallowing budget and patience at the same time, and much of it is unnecessary. We sit down with Donovan Pyle, CEO of Health Compass Consulting and author of 'Fixing Healthcare', to expose where employer dollars leak out of the system and how to plug those holes without sacrificing benefits. Donovan has helped organizations with tens of thousands of employees save four figures per employee per year, and he explains why the fix starts with incentives, contracts, and visibility, not another network discount.

We trace Donovan’s journey across carriers, brokerages, and consulting to show how misaligned incentives became the norm. You’ll hear how ACA medical loss ratio rules pushed insurers to vertically integrate with PBMs, why spread pricing inflates drug costs, and how cash prices can undercut “negotiated” rates. We break down the playbook employers can use now: request the 408(b)(2) broker compensation disclosure, move to a fiduciary advisory model, run a true PBM RFP with pass-through terms and audit rights, and carve out shoppable services with bundled prices at centers of excellence. Donovan shares examples from large employers and a teachers’ union that saved millions by changing one contract.

If you think health plans are fixed products, this conversation reframes them as a vendor stack you control. From specialty drug sourcing to bundled surgery “futures,” there are practical ways to buy care like a world-class procurement team: with transparent pricing, competition, and measurable quality. The result isn’t just lower spend; it’s better access, fewer billing surprises, and benefits employees actually feel. Ready to stop paying more for less? Listen, take notes, and start with one move this quarter, ask for the 408 disclosure and audit your PBM terms.

Reach Donovan here: 
www.FixingHealthcare.com
Donovanpyle.com
healthcompassconsulting.com
www.linkedin.com/donovanpyle
Get the book: "Fixing Healthcare' https://amzn.to/43hvjgb

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SPEAKER_00:

Whether you're a speed computer or just starting your training as a law firm owner. The Leadership and Law Podcast is here to equip you with the knowledge and tools you need to build a successful and fulfilling legal practice.

SPEAKER_02:

Welcome to another episode of the Leadership in Law Podcast. I'm your host, Marilyn Jenkins. Please join me in welcoming my guest, Donovan Powell, to the show today. Donovan is the CEO of Health Compass Consulting and author of Fixing Healthcare. Donovan helps businesses with 110,000 employees cut healthcare costs and improve benefits. He's a thought leader tackling the$300 billion in annual waste within employer-sponsored health care and helping clients save an average of$1,856 per employee annually. Donovan's Insights have featured are featured on Employee Benefits News, Yahoo Finance, and SHRM. And he's here to share actionable strategies for your organization. I'm excited to have you here, Donovan. Welcome.

SPEAKER_03:

Marilyn, it's good to see you. Thanks for having me on.

SPEAKER_02:

Absolutely. I'm excited for this conversation, especially this time in our country. Tell us a little bit about your leadership journey and how you got to this point.

SPEAKER_03:

Sure. I've really witnessed and experienced the healthcare crisis from three different angles. One, I started off on the insurance carrier side of the business, where benefits brokers were my customers. I was inspired by a gentleman by the name of Harris Rosen who found much better ways to finance and procure healthcare for his employees, saved his company over a half a billion dollars doing so. And very naively thought, geez, if I just move to the brokerage side of the business, I can scale those kinds of solutions, I can help a lot of people, I can probably make some money doing that. And it turns out I was completely wrong for a bunch of reasons that I didn't know at the time. And that really inspired me to start a Health Compass Consulting in 2018, which is a management consulting firm that specializes in helping mid-sized businesses finance and procure healthcare more effectively. So they stock wasting$4,000 per employee per year on average.

SPEAKER_02:

Oh my gosh. So let's talk about the waste. Your book mentions that there's a staggering 25% of employee-sponsored healthcare that's wasted. Where is are we seeing that? What are the reasons behind that?

SPEAKER_03:

Yeah, that that and that's the most conservative estimate. So that's this is a$325 billion a year problem. And just to level set for your audience, U.S. employers uh cover 164 million Americans with healthcare benefits each year. They spent$1.3 trillion on healthcare last year, and 25% of that was wasted. So to answer your question, where is that waste coming from? You've got some very unusual things in the healthcare industry where people oftentimes don't see prices. And in a market economy, if you can't see prices, then you're not going to be, you're not going to be a very effective purchaser or consumer of healthcare, both at the employer level or at the patient level. And a lot of this stems from the fact that hospitals actually created insurance companies in the third in the 1930s to stabilize their revenues. They created a SaaS product, a recurring revenue model back in the 1930s. And they did that not necessarily for patients, but to stabilize their revenue. And so you gotta, for employers, they often they don't understand their healthcare supply chain. They don't understand who are the supply side vendors. They rely on brokers for advice, but brokers get paid to sell products. They're supply side vendors. They're not in the business of giving companies financial advice. And this, and so you're effectively dealing with double agents. You're relying on double agents, and that's not a very effective way to manage your second largest expense.

SPEAKER_02:

Wow, that's interesting. I agree with the pricing. We just, when you're in a plan, you just go to the assigned network and you do whatever you do. And you, as the patient, you never get to see the numbers if it's covered under insurance.

SPEAKER_03:

Yeah, and there's a lot a lot of talk about the Affordable Care Act right now. And let's, and I think this is an important conversation that we do this post-mortem on legislation, right? Did what were the legislation's stated goals? Right? Let's go back to that and let's let's see, did it actually achieve its goals? And if it didn't, we probably need to change the legislation or repeal it, make it better, what have you. But we need to achieve our stated goals. And so to your point, and today, fast forward 10 years after the Affordable Care Act went into effect, most people think that it just affected the individual market, which is about 5% of the population. No, it actually had a massive effect on the employer market, and that which covers about 50% of Americans. And to see, to just to give you an example of how distorted and screwed up things are right now, anyone who goes to a hospital or a surgeon or any clinician right now and pays cash for that service gets a usually gets a better deal than a Fortune 50 health insurer who has millions of lives of leverage that they could apply in getting a better unit price on the hospitalization or the healthcare itself. But because of the incentives are so backwards, they just don't use it. They're actually incentivized to have higher unit prices, a higher cost basis. And so there's all kinds of perverse incentives in this industry. And as an employer, you have to understand these things. If you don't understand these dynamics, you're gonna get abused by the system.

SPEAKER_02:

And most businesses, frankly, are so you're with what you're doing, is you can actually go and chat make negotiations for them.

SPEAKER_03:

Exactly. So the challenge that we see in the market is this Finance teams have no experience in technical expertise in healthcare, finance, or procurement. HR teams have no technical expertise in healthcare finance or procurement. That's not what they do. They have a million other things that they have to do. And so inherently, when businesses don't understand something, they need specialized expertise, they hire outside expertise, right? Like for my company, I don't want to have to keep up with the ever-changing tax laws of the United States. And so I hire a CPA to do that for me because I don't have the mental bandwidth to actually take that on myself. And the CPA works for me. I pay them a fee and they work for me. The challenge in healthcare is unique because these companies that don't have these internal resources, they work with brokers and they don't understand that the brokers get paid by the insurance companies and the pharmacy benefit managers. Okay. They get paid on both sides of the transaction. And this is why they make more money when your costs go up. So just to use analogy, it's it's it's the equivalent of working with a CPA who gets paid by the IRS. That is ludicrous. You would never do that in your business. But when it comes to our second largest expense, that's exactly what most companies are doing. And most of them unknowingly, they don't even know that's how their broker gets paid. And so luckily, to and so to bottom line this, there's an army of supply-side consultants and people that are working diligently every day to extract as much money out of employers and patients as possible. It's a whole, there's a whole industry for it called revenue cycle management, right? RCM, it's a$150 billion a year in industry. They have conferences every year, and you can go and see all the latest tricks on how to extract as much money out of patients as possible. But the question is, who is protecting employers? Who is protecting patients? And to solve for this problem, there's a bunch of small management consulting firms that have appeared in the market over the past 10 years who sit who actually embrace fiduciary responsibility. They actually serve as a fiduciary to the employer, which means they are legally obligated to give advice that's in the best interest of the employer. It's a very different dynamic than the broker relationship. And so there's a small army of these management consulting firms appearing in the market. And I think that's good progress, but then employers need to be aware that there is a third option out there. Okay. So that's one of the reasons I'm going on these podcasts. It's one of the reasons I wrote this book because we don't need an act of Congress to reclaim some of this waste. We there are things that the private sector can do if only they have the right guidance.

SPEAKER_02:

I love that because they make it sound so incredibly complicated. And speaking to the knowing your prices, a thing happened to me many years ago where I was having a formulated medication at a chemist done because it wasn't available in the particular form I needed it. I was paying like$25.$25 every time I needed it. Then my insurance decided to start covering it. First time I picked it up, it was the price on the tag was$225.

unknown:

Yeah.

SPEAKER_02:

So I went to the chemist and I'm like, dude, I usually pay this. And so he's nope, nope, that's what they negotiated. So I called my insurance company. And they're like, no, nothing's what they negotiated.

SPEAKER_03:

So that was ridiculous. It is totally ridiculous. And here's what's happening behind the scenes. Because of the Affordable Care Act's medical loss ratio rules, basically, what happens in this negotiation was the legislators politically out front, they said, listen, you health insurance companies, you guys are making too much money. Here's what we're going to do. We're going to cap your margins. And here's how we're going to do it. 85 cents on every premium dollar has to be spent on the care itself, right? Hospitalizations, labs, imaging, surgeries, drugs has to be spent on those things. And if you don't spend 85 cents on every premium dollar on those things, you have to give the difference back to the employer and the employees. Okay. Anyway. And the insurance companies are very smart, right? So they said, okay, here, oh, you're going to cap our margins? Here's what we're going to do. We're going to start vertically integrating. We're going to start buying the supply side of healthcare itself. And we're going to start making money off of the supply side, increasing our cost basis. And so basically, what they've all done, and you witnessed this, is they bought the pharmacy benefit managers, and now they make more money selling drugs to employees than they do off the insurance underwriting profit itself. So insurance is almost a loss leader for selling drugs to employees. And what they're doing in that negotiation with the drug maker is they're marking up the price of the drug by undisclosed amounts. And you can surmise from your experience that they probably marked it up about 150 bucks, maybe even 200. And so you times that by thousands and thousands of transactions every day. And this is when we talk about waste, this is what we're talking about. You don't have to use those pharmacy benefit managers. There's so many opportunities out there that employers just aren't being exposed to because they're not working with people who are financially incentivized to actually solve these problems. It's a low-hanging fruit.

SPEAKER_02:

So when you say fiduciary-based advice, you when a company contracts you, come in and help us see where are we making the mistakes? Show us how rising health care costs are not enabled. Well, help me. You are fiduciarily responsible to give them the accurate advice, the research, whatever they need to make these new decisions.

SPEAKER_03:

Well, 100%. It is a legal relationship that we have. Fiduciary is a legal term, as and for good reason. And so it changes the dynamic tremendously. So we're in the business of selling services, right? Consulting services, procurement services, implementation services, and management services. This is the role that we think a third-party intermediary should be playing. They should be serving the employer, protecting the employer, because they don't, the employer doesn't know this stuff. They don't know how to buy Humira, right? The best-selling drug in the history of the world that 2% of the population is on that costs$100,000 a year through legacy channels. They don't know how to get it for less. And at the end of the day, it's employers that pay for healthcare. Insurance companies take on no risk. Health insurers take on no risk. It's not what they do. It's not real, it's not actually even insurance. It doesn't even meet the definition of insurance. And so, as an employer, you got to realize it's your money, it's your employees' money, and you gotta, you gotta take a fiduciary stance on your own program and say, hey, listen, are we actually managing our supply chain well for value? Or are we just delegating the management of it to third parties like insurance companies who have no financial incentive to do that well on your behalf?

SPEAKER_02:

I think with all that money, we still want to see why they're the insurance companies are sponsoring all the football teams around the world. They're the main it's amazing the amount of money throwing at it. I read an article a few years ago that I found really comparing insurance to the country of England or the United Kingdom. They literally, so there's so many knee replacements and hip replacements, they go to those manufacturers and have it bid out to help me eat their money this year. As opposed to it's just a different way of handling, knowing you've got these, and that is the socialized medicine, NHS, and all of that, but they know they're gonna be X number of hip replacements this year. So they go to the hip replace the hip manufacturer and negotiate a price for all of those to put in the system.

SPEAKER_03:

It's just yes, it's it's it's to me. Ironically, they're taking a more market-driven approach. Many people in the United States is just amazing, right? So many layers of irony there. So it's funny, Walmart has been really innovative in this space, and it and there's a good reason for it. Walmart, their profit per employee per year. I think it was last time I checked, it was around$6,500 per employee per year in profit. And there's this fantastic uh video of Sam of Sam Walton in in in 1994 talking to his board about healthcare costs and how we how they need to solve for this problem because they their margins are thin. They have to solve, they can't afford 10% increases on their second or third largest expense. They just can't, that's not sustainable. And so they've been very proactive. In fact, they've done exactly what you said regarding something like total knee replacements. They said, okay, listen, we're buying 10,000 knee replacements a year or something, whatever the number is. And so they're actually buying futures on knee replacements. They're saying, listen, we're gonna buy five years worth of knee replacements, but we're gonna lock it. I want it locked in at this price. We're not using Cygna's negotiated network discount. We're no, we're not doing any of that. We're getting a bundled price directly from the centers of excellence that we want to work with, you know, those outpatient surgery centers that have very high quality scores. They do hundreds of knee replacements a year. And we're gonna lock in a price with these guys and guarantee them volume for an exchange on a better price.

SPEAKER_02:

That's fantastic. I didn't realize that was available in the U.S. I thought you kind of just had to have whatever was the best price insurance for your employee health insurance.

SPEAKER_03:

There is so much. I'm so glad you said that, Marilyn. There are so much, there are so many solutions that employers have no idea exists. I mean, I tell people this all the time. There are almost infinite ways to build health plans. And I'm not talking about co-pays and deductibles. I'm talking about the vendor stack. A health plan is a vendor stack, right? Your stop loss, your administrator, your networks, all these different administrative pieces. And there are almost infinite ways you can put these pieces together to achieve your goals for your specific population. And the reason that employers aren't don't know that is that they rely, again, on brokers. I'm not trying to beat them up, but it's just the reality. They served the brokerage industry, it was designed to serve as retail distribution for health insurers. And so health insurers have these commoditized products that are easily bought and sold, but they're also hugely expensive, hugely wasteful, and employers need to know that there are a lot of different ways to do it.

SPEAKER_02:

Yeah, because I know that that healthcare benefits are a make or break when it comes to profit in certain years. And it's just expected it's going to go up every year. And then, of course, you have childbearing age women, you've got older men that are getting ready to retire, maybe injured, things like that. Is are you able to help nationwide or is this a state-by-state basis type thing?

SPEAKER_03:

Yeah, we work nationally. We prefer to not work with groups that are based in California for obvious reasons, but yes, we work nationally.

SPEAKER_02:

Okay, great. And looking at obviously blind spots when you're looking at executives and when they're looking at the employee healthcare, what type of blind spots would you have them look at now if they're thinking about reaching out and going, God, I really need to know if there's an option here?

SPEAKER_03:

Okay, so let's talk about the first thing in your supply chain as an employer is typically, unless you're unless you're a large company and you've got in-house resources, typically the first thing in your supply chain is your broker. And so you're relying on them to curate a bunch of products, et cetera. And the first thing you want to do is actually understand who they work for. And by the way, since we're on a this is a illegal podcast, this has been law since 2020, 20 January 1st of 2022. Every employer in the United States is supposed to get re request a 408 disclosure from their broker. Okay. And that's important because in that disclosure, under federal law, it's supposed to say, here are all the revenue streams that the brokerage firm gets from insurance companies, pharmacy benefit managers, what have you? Just a quick example. We saw one from a top five brokerage firm in the country, and that the 408 disclosure said, on occasion, we receive loans and lines of credit from insurers.

unknown:

Okay.

SPEAKER_03:

Do you really want to be getting financial advice from a company that gets loans and lines of credit from the very same companies that you're asking them to negotiate with on your behalf?

SPEAKER_02:

Oh my god. That sounds completely compromised on all levels. How can you honestly sell somebody something when you know you're going to get paid from three different directions on that?

SPEAKER_03:

I couldn't do it. I went and worked for a national brokerage firm, and it was a disaster. It was like I was trying to solve these problems, and they wanted to do this. They wanted to just sell these products, these cookie cutter products that were just crushing employers. And so it didn't work. And it and it's not working. And I think we're unfortunately or fortunately at a Breaking point right now. We're seeing renewals that are through the roof that for companies that haven't innovated in this space. And so hopefully this is this is the moment where people will say, all right, you know what, we need to take a consider a different approach to all this. And that should start with getting unbiased advice. So in in my book, I lay out a six-step process for healthcare transformation. And the first step is the most critical, and it's getting unbiased advice. So you can do that by working with a management consulting firm like mine and others that are in the market, or you can hire benefits expertise in-house, which is what people like Mark Cuban have been advocating for.

SPEAKER_02:

That's been that's amazing because I know that when I was working for that set company years ago, every year we knew that our price was going to go up, our employee benefit part of that would go up, and the benefits would go down. And depending on age, they change. It's just ridiculous. And looking at this now, it's kind of, I think fiduciarily, using that word again, I think it's no-brainer that if you've got at least 100 employees, this company aren't for at 80. Still at$200 per prescription that you're wasting it's just a crazy amount of money. So I think any employer should reach if grab your book, if not reach out to you right away. It just, I can't believe the amount of waste. And what you're saying is how easy it is to go around and actually choose your own and actually negotiate.

SPEAKER_03:

100%. And just a quick story on that. One of the recent lawsuits that came out that one of your audience may be familiar with is that there was a fiduciary suit against Johnson and Johnson. And so there are so many layers of irony in this story, it's incredible. Because obviously Johnson and Johnson's a drug maker, but here's here are what the allegations were. Basically, an employee was taking a sp a specialty drug that cost about$10,000 a month, right? That was the total price, all in, and maybe their copay was$250. I don't recall what it was, but the all-in price was about$10,000. One day they went to their pharmacy, their pharmacist, and asked, Hey, what how much would this be if I just paid for it cash outside of the plan? And the pharmacist said$78.

SPEAKER_02:

Oh my God. And the insurance is paying$10,000.

SPEAKER_03:

The employer is paying$10,000. They're a self-funded company. But they're using, they were using at one of the big three pharmacy benefit managers, which is of course owned by one of the big insurance companies, and they spread price and they don't embrace fiduciary responsibility at all. In fact, they'll they run from it. The contracts, since we're talking, you've got a legal audience here, the contracts for PBMs is incredibly complex. Some of these contracts are about 170 pages long, which right there is a red flag to me. And in it, if you actually read it, some of them say we do not serve in it as a in the fiduciary capacity to the plant sponsor. And if you make us, we will terminate this contract.

SPEAKER_02:

Oh, really?

SPEAKER_03:

Yes.

SPEAKER_02:

Oh my gosh. So you're they're not on your side as the customer. They're that's ridiculous.

SPEAKER_03:

Nope.

unknown:

No.

SPEAKER_02:

That's amazing. I know that there's also people talking about the price of germs overseas compared to in the US. It's massive. I think I read recently the you know, Zenpik type thing is between$1,200 and$1,400 a month in the US. Overseas, it's advertised for$200 to 300, 300, 300 euros a month.

SPEAKER_03:

Yeah, yeah. We've got some. We even though there are lots of things that employers in the United States can do to buy drugs better in the current state, there is also, there are also some real challenges from a regulatory perspective and intellectual rights, intellectual property rights perspective that needs to be solved at the legislative level. And really think we need to ideally work on both problems at the same time, right? Employers can take action right now. Congress, who knows what they're doing, but I'm not going to hold my breath. Yeah, exactly.

SPEAKER_02:

This is absolutely this is fascinating. I had no idea that I could bring in a consultant that would help me lower my health care costs, improve health care to my employees, and still grow my profit margin.

SPEAKER_03:

100%. We got a call from a teachers union, large teachers union here in Central Florida a couple of years ago. And they said, listen, and I didn't even know these people existed. They said, listen, we we've got our some of our union members sitting on this insurance committee, and they're smart people, but they don't know this insurance stuff. And they're being asked to make decisions about this$65 million healthcare budget. And so they said, listen, can you we don't know if we trust the broker? We don't know if we trust the district. Can you just come in and tell us what we don't know? And so we did a little educational session, we did a deep dive on their plans. We said, listen, here's the lowest hanging fruit is that your school district hasn't gone to RFP for a new pharmacy benefit manager in seven years. And by the way, you're with one of the worst ones. Do that. Like push for that in these committee meetings. And they did. They got a new pharmacy benefit manager and they saved about$3.6 million last year.

SPEAKER_02:

Well, anybody that's listening to this, if you haven't caught on yet, you need to, if you've got at least 100 employees, you need to actually contact Donovan. Absolutely. At least get his book, Fixing Healthcare, and see where to start. And you can save a lot of money and increase your profits and your healthcare view employees.

SPEAKER_03:

Yeah, the book's coming out November 12th, and it'll be on all the all the channels. The website is fixinghealthcare.com. That's fixinghealthcare.com. And then my personal website is Donovan Pyle.com.

SPEAKER_02:

Fantastic. We're going to put both of those in the show notes. This has been a great conversation, Donovan. I really appreciate the time being here. And we'll make sure that the links are in the show notes so people can reach out to you and connect with you and hopefully get you in there to save them some money and get better health care for their employees.

SPEAKER_03:

Whether it's my firm or another one that does similar things, that's all great. We just want to solve these problems. We need to solve these problems. We're going to have, we think the political divide and the unrest is bad right now. It's going to get worse if we don't start solving these problems. And again, it's the private sector can do it. We don't have to wait for Congress. So act now.

SPEAKER_02:

I appreciate that. Again, thank you for being here. This has been a great conversation.

SPEAKER_03:

Thank you, Marilyn.

SPEAKER_01:

Thanks for joining me today for this episode. As we wrap up, I'd love for you to do two things. First, subscribe to this podcast so you don't miss an episode. And if you find value here, I'd love it if you would rate it and review it. That really does make a difference in helping other people to discover this podcast. Second, you can connect with me on LinkedIn to keep up with what I'm currently learning and thinking about. And if you're ready to take the next step with a digital strategist to help you grow your law firm, I'd be honored to help you. Just go to Law Marketingzone.com to book a call with me. Stay tuned for our next episode next week. Until then, as always, thanks for listening to Leadership in Law Podcast, and be sure to subscribe wherever you listen to podcasts so you don't miss the next episode.

SPEAKER_00:

Thanks for joining us on another episode of the Leadership in Law Podcast. Remember, you're not alone on this journey. There's a whole community of law firm owners out there facing similar challenges and striving for the same success. Head over to our website at lawmarketingstorm.com. From there, connect with other websites. And stay up to date on the latest episode. Don't forget to subscribe and leave us to review on your favorite podcast platform. Until next time, keep leaving with Vitals and keep growing your firm.

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